Thursday, October 17, 2013

ACAP Health: Next Furniture Fiasco?

When does the City of San Angelo actually purchase a product or service?  This became an issue more than once under Interim City Manager Michael Dane.  The Furniture Fiasco saw over $100,000 in furniture ordered and installed without required City Council approval.  Council honored West Office Supply's good faith effort in delivering product to newly renovated offices in City Hall.

David Toomey of ACAP Health would have Council and the public believe he has a better case, given City Council's May 2012 endorsement of the service concept with an explicit order to negotiate a contract and bring it back.  Human Resources Lisa Marley and Interim City Manager Dane could not complete Council's directive within the next five months.  At this point responsibility for the deal fell into new City Manager Daniel Valenzuela's lap.  Toomey said he worked hard to finalize the deal with no success for the last year. 

I have long disliked cost reduction sharing agreements in the health insurance arena.  First, the contractor has a strong incentive to optimize the system to maximize their payment.  Second, I've seen those selling the service stack formulas in their favor.  There's every indication ACAP Health did that in last night's presentation, especially in their 8% cost escalation vs. the 3% negotiated.  That's an annual 5% savings right off the bat.

Toomey suggested ACAP saved the City $3.9 million, only he drastically overstated 2013 savings by not annualizing January-August data and included 2014 savings of $1.4 million, which is yet to occur.

Using the City's claims data I find two year savings of $725,000.  That's $3.1 million less than ACAP claimed. 

Toomey gave a timeline purporting how his firm had been officially engaged:

9/11: City Leadership authorized work under a percentage of savings arrangement.  The City currently has a 30% and a 40% Shared Savings Contract for specific Aetna services.

How did City leadership authorize this work and with whom?   If the City already has a 30% and 40% Shared Savings Contract for specific Aetna services, those would need to be carved out of any agreement with ACAP.  The City would not want to double pay (60 to 80%) for savings, as that would virtually wipe out any savings benefit.

5/15/12: Council Meeting, Councilmember Hirschfeld motioned for Staff to formalize a contract on a percentage of savings basis; seconded by Councilmember Farmer, with unanimous approval Weekly outreaches to Staff to initiate contracting process 

Councilman Hirschfeld never met a health insurance dollar he liked.  The $500,000 savings credited to Hirschfeld at his retirement from public service should be reduced by whatever settlement amount is reached with ACAP Health.

Two years ago Holmes Murphy and ACAP consulted on the exclusive provider arrangement (EPA) with Aetna/San Angelo Community Medical Center.  City documents refer to this stage as Phase 1 of ACAP's work.  The EPA's fee structure likely drove the majority of savings.

Also, I can't imagine a health care consultant doing a large body of work (Phase 2) without a contract.  While Toomey was led to believe one was coming, the deal was never executed.  Also, it's not clear to me what clinical engineering services ACAP Health provided.  Of the work product listed on Slide 6, only one looks like it came post EPA establishment. 
Line by line claims analysis to assess actual claim savings results 

I don't consider that clinical engineering, not in the least.

The ACAP Health situation is representative of a Barney Fife City government the last few years.  In this case City Council indicated their pleasure, which staff ignored or failed to execute.  In other situations, like the Furniture Fiasco, City staff did what they wanted, then pointed fingers when discovered.  The City made good for West Office Supply.  How will they respond to ACAP Health?

Councilwoman Farmer can represent the unanimous vote to engage ACAP in May 2012.  Council could ask Lisa Marley and Michael Dane to illuminate the public on this issue.  Why did staff bring ACAP's proposal to Council?

The Standard Times reported:

There was a lot of verbal negotiating with ACAP, Lisa Marley said, but little hard documentation. City staff will bring whatever paperwork it has back to the council at a future meeting, she said.
“I’m pulling any information we have, including (work) with Holmes Murphy,” Marley said. “It’s in the council’s hands now. They will make a decision on how to handle it.”

I'd love to hear the behind the scenes story. 

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